Ego is the Most Expensive Carrying Cost

Yesterday, we talked about how people hide from their bank accounts. But for the real estate investors I work with, Money Shame looks completely different. It looks like holding onto a bleeding property.

Every experienced investor has bought a bad deal. Maybe the structural condition was worse than anticipated. Maybe the carrying costs ate the margins. Maybe the market shifted mid-renovation.

At some point, the math is clear: the property is cash-negative. It is draining your liquidity. The logical move is to sell it, take the loss, and redeploy the remaining capital into a performing asset and one you can manage.

So why do so many investors hold on even when struggling? Because of ego.

Selling at a loss means having to admit to yourself, to your joint venture partners, your spouse, or your peers that you made a mistake. It means taking a hit to your identity as a "successful investor."

So instead of taking a loss today, you subsidize the bleeding property with your personal cash flow, month after month, year after year. You let the shame of a bad deal slowly drain the wealth from your good ones.

You treat a mathematical error like a moral failure.

The most successful operators I know don't have a perfect track record. They just have a ruthless ability to detach their identity from the asset. If a property doesn't perform, they cut it loose or they restructure it to make it work. They don't let their ego hold their capital hostage.

A bad deal doesn't mean you are a bad investor. It just means it's time to stop the bleeding.

Ken and I once offered $80,000 below ask for a multi unit property that we were considering adding to our real estate portfolio. When I ran the numbers, factoring in the deferred maintenance, current condition and capex that would be required to rehabilitate and stabilize it, that was its true fair value to us where the numbers would work.

Knowing what the sellers had paid for it a few years earlier, our offer meant they would be taking a significant paper loss. Our own realtor looked at us like we had two heads for offering so much below ask.

The sellers declined. They countered with a $50,000 drop. We walked away.

Instead of taking the hit and cutting the asset loose, they held on. They let their ego subsidize the bleeding.

A year later? With even more units sitting vacant, no improvements made, and another 12 months of carrying costs down the drain, they relisted the property — at the exact price we had initially offered them.

Ego is the most expensive carrying cost in real estate.